The head of American Express Co.'s recently launched Membership Banking service said his Internet-only bank competitors' business models are unsustainable.

Ruediger Adolf, senior vice president at the New York financial services company, said Membership Banking stands apart from small Internet-only upstarts in that it offers attractive rates on checking accounts and meshes on-line banking with other American Express offerings.

Generous rates offered by some rivals -- for instance, 5% on checking accounts -- are not sustainable in the long run, he said, unless the customers can be attracted to other products and services.

"If all you do is offer a better price, but you don't offer a better experience or other products, this business is not going to be successful," he said at a Jupiter Communications on-line financial services conference this week. "You always have loss leaders in some products, but some of our competitors have only one product."

Membership Banking offers 2% interest on checking, which Mr. Adolf described as attractive for consumers and sustainable for American Express.

The offering is gaining customers without an expensive mass-media blitz, he said. For now, American Express is targeting existing customers whom it deems most likely to adopt Internet banking through e-mail appeals, the American Express Web site, and call centers.

Mr. Adolf did not name specific competitors, but the Amex strategy contrasts with the conspicuous advertising campaign of Bank One Corp.'s

"Those who can afford it are spending hundreds of millions of dollars to build a brand, but it will still not be the kind of brand we already have," Mr. Adolf said.

American Express is avoiding some of the problems confronting traditional banks on the Internet and those launching Internet-only subsidiaries, Mr. Adolf said. For instance, Amex does not have to wrestle with integrating its Web offerings with legacy technology. And in contrast with Internet-only subsidiaries of traditional banks, Amex does not have to worry about cannibalizing its branch-banking customers, because it doesn't have any.

American Express plans to roll out new Membership Banking products and services in coming months, he said.

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